Hart Energy Publishing

Doral Energy Farms Into Blugrass Energy NM Cave Pool Unit

Steve Toon
October 19, 2009
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Doral Energy Corp. plans to acquire a 40% working interest in the Cave Pool Unit in Eddy County, New Mexico, from Blugrass Energy Inc., Calgary, (OTCBB: BLUG).

Doral will assume operations from Blugrass in a joint operating agreement that will outline per-well operating charges. Blugrass will pay US$200,000 for start-up costs to rework and repair the assets. Doral will not be responsible for their proportionate 40% share of these initial start up costs.

Doral will additionally have the option to acquire Blugrass' 60% working interest for 24 months for either US$2 million or US$40,000 per producing net barrel, but not less than $2 million.

The Cave Pool Unit is within the Artesia Vacuum trend in the Grayburg Jackson Pool. Blugrass recently completed the acquisition of these assets involving 2,800 acres from Marks and Garner Productions (aka Robin Hood LLC). Current production is approximately 12 barrels of oil and 30,000 cubic feet of gas per day from 32 wells which were drilled on 40-acre spacing in the Grayburg formation of the Grayburg Jackson Pool. An additional 10 shut-in wells on the properties have been identified and will be reworked and returned to production by Doral after closing. The redevelopment of the Cave Pool Unit as a 20-acre five-spot Grayburg waterflood project could potentially add approximately 100 development drilling locations and potential gross reserves in excess of 3 million barrels of oil equivalent.

The Cave Pool Unit properties are adjacent to three leases owned and operated by Doral in Square Lake Field. Doral will grant Blugrass access to proprietary geological and engineering data on Doral's adjacent leases.